THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

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[00:00:11] JOHN VAUSE, CNN ANCHOR: This is CNN NEWSROOM, live from Los Angeles.

Ahead this hour -- memo hysteria. The U.S. President set to declassify that controversial memo written by congressional Republicans accusing the FBI of bias in the Russia investigation.

Hallmarks of genocide -- the U.N. envoy speaking out about the violent crackdown on Rohingya Muslims by Myanmar's military.

And pay what you want -- the ambitious model for one small cafe defying the rules of a market economy.

Hello everybody. Great to have you with us. I'd like to welcome our viewers all around the world.

I'm John Vause. NEWSROOM L.A. starts right now.

The showdown between Donald Trump and the FBI is expected to come to ahead on Friday with the U.S. president expected to approve the release of a controversial memo alleging FBI abuse of surveillance authority while investigating a Trump campaign adviser.

Sources the President believes the memo will discredit the Russia investigation. But the FBI has warned of grave consequences if the memo is made public claiming it distorts the facts and could jeopardize intelligence gathering.

Sources tell CNN there are now concerns within the White House that FBI Director Chris Wray who was chosen by the President to lead the bureau could resign if the memo is released.

For more on this Jake Maccoby is a former Obama administration official and former policy adviser for the Hillary Clinton campaign, John Thomas is a CNN political commentator and Republican consultant and Bobby Chacon is a retired FBI special agent. Good to have you all with us.

Ok. Jake -- you're the new guy. So let's start with you. Ok.

In the last couple of hours Axios has reported that after all of this inside the Trump administration, sources who have been brief on the Nunes memo expect it will be underwhelming and not the slam dunk document it's been hyped up to be.

At this point does that even matter if it's a dud or has the groundwork now been laid for the President to fire the deputy attorney general?

JAKE MACCOBY, FORMER CLINTON ADMINISTRATION OFFICIAL: Well, I think it's a reminder that the President has been looking at this as a document, interesting enough for the American people is looking at it as a document that will help him get out of a tough situation with the Russia investigation. This is a purely political document at this point and as we're seeing from the White House is that now they're starting to get cold feet and realizes this isn't going to be the exoneration that they were hoping for.

VAUSE: Ok. Well, the House Speaker, Republican Paul Ryan, he says everyone like chill, take a step backwards, you know, because this isn't about undermining the FBI. It's all about civil liberties and stuff. This is what he said.

REP. PAUL RYAN (R-WI), SPEAKER OF THE HOUSE: What this is not is an indictment on our institutions, of our justice system. This is not indictment of the FBI, of the Department of Justice. It does not impugn the Mueller investigation or the Deputy Attorney General.

What it is, is the Congress's legitimate function of oversight to make sure that the FISA process is being used correctly.

(END VIDEO CLIP)

VAUSE: Ok. The FISA process is the surveillance process. We'll get to that in a moment but, you know. So John -- you know, the party that, you know, passed the Patriot Act is now worried about civil liberties or could it be, according to our own reporting and taking up Jake's point here -- CNN has reported in recent phone calls Trump has told friends he believes the memo would expose bias within the FBI's top ranks and make it easier for him to argue the Russia investigation is prejudiced against him, according to two sources.

So John -- civil liberties here or blowing Mueller's investigation?

JOHN THOMAS, CNN POLITICAL COMMENTATOR: I think the Fourth Amendment is an important thing to protect. So I want to know what's in that memo.

And I think right now we're playing the expectations game. You know, the Democrats are protesting so much that I think we're building this memo up potentially to be more than it is. And so the White House is trying to bring it back down to reality because if it isn't anything like a shocking bombshell people will say this just nothing burger.

But in essence everybody who has seen the memo --

VAUSE: Right.

THOMAS: -- it's pretty significant.

VAUSE: And to, you know, it's certain that there is a debate to be had about surveillance and the authorities and the powers, you know, which law enforcement has in this country. 3 But Bobby, you know, the basis of this memo is essentially accusing the FBI of using that Trump-Russia dossier t obtain the FISA warrant and they used that to surveil an American citizen, most likely Carter Page, a former Trump campaign worker, maybe others and that the deputy Attorney General Rod Rosenstein signed -- likely signed off on it.

Explain though how this FISA process works? Because lost in all the noise seems to be how this process actually goes through because it is complex and, you know, there are a lot of protections in there for American citizens.

[00:04:59] BOBBY CHACON, FORMER FBI SPECIAL AGENT: Well I mean it's complex and it's very secret. The FISA court is very secret -- who sits on the FISA court, what goes through the FISA court. This is not like a traditional wiretap that I used to get against the Mafioso in New York City.

This is -- this is a very secret thing and it's under seal, you know, for a much longer period of time and much less people have access to any information that's going to a FISA court or coming out of a FISA.

The oversight that Mr. Ryan -- that Speaker Ryan talks about is there already. And it doesn't really take place with a memo from the committee. We have an office of professional responsibility within the FBI at large. We have, you know, office of inspector general within the Justice Department.

Those are the proper bodies that will oversee any improprieties that may have been committed by FBI agents in this process. This memo is not the proper function -- proper oversight functioning. This is a political memo that has some conclusions that are already being challenged before it's released.

So I think that we start talking about oversight, there are proper oversight provisions and procedures.

VAUSE: It's just not this?

CHACON: This is not the way to go about it.

VAUSE: And just to stay with the topic because the "Washington Post" is quoting David Kris, he's an expert on FISA. This FISA law is about 40 years old. And he talks about how the court will often be told about relevant facts -- if there's bias, if the source may be tainted and the judges will look at that, does take that into account.

This is what Kris said. "Courts routinely accept and uphold affidavits that generally describe the source's shortcomings, whether they be prior convictions, drug use, false or inconsistent statements, membership in a criminal, direct involvement in a defendant's misconduct or outright hatred of the defendant without including every specific detail."

So that brings us back to this dossier. So even is the dossier is tainted in some way, you know, that seems to be that it would not have any bearing on the judge's decision to issue, you know, surveillance of someone like Carter Page.

CHACON: Well, it might have some bearing but it might not be fatal to that bearing. So the judge is going to look at the totality of the things that are presented to him, including assessing each individual informant that brings information that they are presenting information from.

And the judge will test those informants. They will ask the prosecutor. They will ask the agents, you know, how often has this informant given you information. How often has it been proven right? How often has he been wrong?

And you know, that's a process that goes through. So I mean, I think the dossier will only be one part of the information that was presented. And we'll see ultimately hopefully in the long run how much testing that the judge did about information before he granted the FISA.

THOMAS: Well, here's the good news. This memo is going to give us an opportunity to audit the process. And if it was done by the book and there was nothing improper or untoward then we'll rule that out.

MACCOBY: Well, clearly -- I mean this isn't a report that's been prepared, you know, with everybody putting in their piece. This is one-sided report by -- not even a report -- it's a one-sided memo by a couple of staffers for Devin Nunes who's already been in trouble for releasing classified information.

THOMAS: And we're going to have plenty of opportunity to fact-check that memo.

CHACON: Well, but you can't fact-check it because the FBI is already saying there are material omissions, right.

VAUSE: Yes.

CHACON: And so, you can't fact-check something that's not there.

MACCOBY: And it's not just the -- it is the director of the FBI who is a Trump appointee, it is the director of National Intelligence, its officials at the Department of Justice. These are Trump appointees who are all saying don't release this, it is wrong.

VAUSE: The FBI is not exactly, you know, a bastion of liberal, you know, hollows -- right.

THOMAS: But the point is it's not between Republican and Democrat in this allegation. It's between the institutions. That's what this memo is alleging. It's not about the Democrats or Republicans are out to get Trump.

VAUSE: You know, it's interesting because I saw this tweet a while back making a very pointed comment. Let's just put it up.

It says, "When you are checking FBI agents because you're under criminal investigation you're losing." Oh, we didn't put the name on there.

But John -- I mean that's a pretty good point, isn't it. I'm just wondering, you know, let's just take a look at who actually put that tweet -- John. And maybe you'd like to -- Sarah Sanders said that. It was back when, you know, the Democrats were giving FBI director James Comey a hard time over the Hillary Clinton investigation.

My point is John -- both sides are guilty of politicizing the FBI.

THOMAS: Certainly. I think the only difference is in this case it sounds like there's evidence that there was abuse. When they were picking a fight with Comey it was just upset about what Comey was having to say in that very moment. They had no evidence of potential abuses or wrongdoing on Comey's part. Now we have texts that are showing politicization --

VAUSE: They show nothing.

THOMAS: But showing that there's extreme political bias, that upper levels --

VAUSE: They said bad things about all the candidates. Peter Strzok.

THOMAS: These agents are being political; for the first time in their history, openly political in this process. The problem -- here's my problem --

VAUSE: Sure.

THOMAS: Here's my problem -- it's the appearance of an impropriety in the Justice Department is as bad as the potential impropriety itself.

CHACON: You know, I abhor what they did and those texts. And for doing it I think they're very unwise. And they shouldn't have been in those positions.

I don't think at all we can make that leap that somehow that tainted what they did in front of the FISA court. It may be there but you can't make that leap based on what we've seen so far.

[00:10:02] VAUSE: Because CNN obtained e-mails to show that Peter Strzok, one of the agents involved, he was in agreement and all for reopening the Hillary Clinton investigation when the e-mails were found on Anthony Weiner's laptop. So, you know, where is the, you know, the underground anti-Trump organization here?

MACCOBY: It isn't there. Nothing in that conversation would lead you to say that well, we should dive into this sort of one-sided Hardy Boys investigation that's being run by Devin Nunes and a couple of staff members.

It's a really strange response that shows that Devin Nunes and the hooligans on that committee are really more interested in protecting the President than they are in actually getting to the bottom of any of this.

VAUSE: I mean I guess John -- if, you know, Republicans were genuine about having a debate about the FISA rules and the extent of the authority of surveillance that law enforcement has in this country, wouldn't it be a bipartisan effort rather than this one-sided effort with four staffers putting together a couple of pages?

THOMAS: No, because Adam Schiff doesn't want to have that conversation.

VAUSE: Really?

THOMAS: He doesn't want to have the conversation. No, he's busy about just saying we can't see the memo. We can't have that conversation because it could compromise national security.

MACCOBY: Adam Schiff is interested in releasing a memo that includes context in the information that was left out of this memo.

THOMAS: And we will release that memo just --

MACCOBY: He voted against releasing the memo.

(CROSSTALK)

THOMAS: They're doing -- no they're doing it in the same process.

MACCOBY: He tried to do it at the same time as the other.

THOMAS: It took over three weeks to get to this point with this memo. It's been less than a week with that other memo. That's the process they could play.

VAUSE: Is it possible the FBI is just doing its job vigorously going after Hillary Clinton, vigorously going after Donald Trump.

CHACON: Well, I mean they're vigorously going after Donald Trump, there's no question about it. I'm not sure how vigorously they went after Hillary Clinton. Remember, they never impaneled a grand jury in that case and the way some of those interviews were conducted, old- time agents like myself have some question about how vigorously they conducted that investigation.

VAUSE: Right. Mistakes were made.

CHACON: Mistakes were made.

And it just wasn't aggressive. If you want to call an investigation aggressive you have to impanel a grand jury. You have to put people in front of that grand jury. You have to question them --

VAUSE: Like they're doing now.

CHACON: -- and you have to trap them into a 1001 violations; very easy to do if you wanted to go that route.

VAUSE: Ok. This has been a week of celebration over at Fox News. They are ecstatic, none more so than Sean Hannity. This is him a few hours ago.

(BEGIN VIDEO CLIP)

SEAN HANNITY, FOX NEWS HOST; Breaking right now, President Trump has read the classified memo showing stunning FISA abuses against this campaign. And it will likely be released as early tomorrow.

Also tonight "The Hill's" John Solomon reporting that Republicans are now looking to make the case that the so-called Russia investigation was based on quote, "politically tainted evidence tied to Clintons loyalists". We'll explain.

And meanwhile tonight, an all-out war on what is the truth and transparency is being wage right here in the United States of America. Fierce, unfair opposition mounting -- what, to conceal and cover up one of the biggest scandals in the history of this country.

(END VIDEO CLIP)

VAUSE: My God, I'm cared. He's vary scary right now.

THOMAS: Must-see TV.

VAUSE: It really is.

So here's the point. Donald Trump won't listen to the advice of his hand-chosen FBI director. But according to the "Daily Beast", according to three sources with knowledge of their conversations Trump has been in regular contact with Hannity over the phone in recent weeks as the Fox News primetime star and Trump ally -- the Trump ally rather has encouraged the prompt release of a controversial four-page memo.

You know, really, Jake? Is this the way a president should be making these kinds of decisions

in cahoots with Sean Hannity?

MACCOBY: No.

VAUSE: That was an easy one -- John.

THOMAS: Well, Sean -- I actually saw ion his Twitter today vehemently denied that and called it fake news that he consulted him about this memo. Of course they talk. He's one of their --

VAUSE: You don't think they talk about this?

THOMAS: Well, I don't know. But all I know is Sean's vehemently denying it so, I mean his word is better than a source, an anonymous source.

VAUSE: Ok. Well, the U.S. State Department says it's highly likely Syria kept some of its chemical weapons despite an agreement five years ago to relinquish the stocks. It also said it's concerned about another report of chlorine gas use by the regime. If confirmed, the third time in the last month. The U.S. is also worried the Assad regime may be producing new kinds of chemical weapons.

(INAUDIBLE) a volunteer rescue group in Syria says at least three civilians were killed on Thursday by chemical attacks in Eastern Ghouta. The Syrian Civil Defense also known as the White Helmets say some of the munitions used contain chlorine gas.

A State Department spokesman said Thursday Syria had reportedly launched at least three chemical attacks in the past month.

Well, the Syrian war has not made headlines lately but terrible scenes continue to play out, this time though on a new battlefield. It's Afrin, a Kurdish area in northern Syria where airstrikes rain down and thousands are fleeing.

The shells and jets are Turkish and Ankara says it's targeting terrorists both Kurdish fighters and ISIS but as in almost all military operations, it's civilians who are living in terror.

Hala Gorani has an exclusive look from inside the region.

(BEGIN VIDEOTAPE)

[00:15:02] HALA GORANI, CNN CORRESPONDENT: For these people of Afrin, life is now underground. This cave home to 12 people, a blanket on the floor the only comfort in the winter darkness. As they crouch waiting for danger to pass.

CNN has obtained exclusive video from inside Afrin. It shows how the threat of Turkish air strikes has drive families from across the Kurdish enclave into caves and basements. Many here say they've lost family members in the last two weeks since Turkey launched its offensive.

And below ground sorrow hangs in the stale subterranean air.

SADIQ MOHAMMED, AFRIN RESIDENT (through translator): We are poor people. My husband was killed. We have no place to go. What are we going to do.

GORANI: Eleven-year-old Yasmin says she lost her father last week, a fighter defending their village.

YASMIN ALI, AFRIN RESIDENT (through translator): My dad was killed and me and my mom and my brothers are all here in the cave. It is really dark here so we are scared because it is really noisy. They're conducting air strikes. What did we do to them? We are just kids. Why is this our fault?

GORANI: This is what they are running from. CNN video shows how air strikes and artillery have shattered the street. Turkey sees the Kurds as a threat. Its Kurdish leaders have long sought an independent Kurdish state in the region.

UM MOHAMMED, AFRIN RESIDENT (through translator): Our homes are destroyed. This Erdogan is dropping bombs on us. We lost our homes our children, nothing is left. Why would this happen to us?

GORANI: The general manager of this hospital in Afrin City says they're overwhelmed with the number of wounded. On one ward, a mother mourns her 10 year-old boy. Wailing "how will I ever live without you?" Doctors say he was fatally injured by Turkish bombing in the city of (INAUDIBLE).

Kurdish officials say scores of civilians have been killed and hundreds injured by the Turkish military so far though CNN can't independently confirm the exact death toll.

In a statement to CNN, the Turkish government said they're only targeting terrorists and that sensitivity is shown to avoid damage to civilians and innocent people and to the environment.

The U.N. estimates 16,000 people have been displaced across Afrin and says some civilians are being prevented from leaving by local authorities.

With no escape, people are left to find warmth and shelter anywhere they can.

Hala Gorani, CNN.

(END VIDEOTAPE)

VAUSE: After a short break all the hallmarks of genocide -- the brutal assessment from a U.N. envoy on Myanmar's crackdown on Rohingya Muslims.

[00:18:03] (COMMERCIAL BREAK)

VAUSE: Eighteen people have been hurt, three seriously after a van ploughed into pedestrians in Shanghai. Police say the driver was apparently smoking at the time. A fire somehow broke causing the driver to lose control. All of this happened on Nanjing Road, the main road there in Shanghai around 9:00 a.m. local time. Eventually the van stopped when it hit a tree.

Well, to Myanmar now where a district judge has denied bail for two Reuters journalists who were covering the Rohingya crisis. They're accused of illegal possession of state secrets. The court has yet to decide if they'll be charged under the Colonial Era Official Secrets Act.

In December, they were invited to meet with police. Instead they were arrested almost immediately after two officers handed them a set of documents.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE (through translator): During the court hearing, the witness police officers gave totally different information of what really happened and what they said in the courtroom.

(END VIDEO CLIP)

VAUSE: Among those calling for the charges to be dropped, the U.N. special rapporteur Yanghee Lee. Over the past few days Lee has met with Rohingya refugees living in camps in Bangladesh and says Myanmar's crackdown on the Rohingya has the hallmarks of genocide.

YANGHEE LEE, U.N. SPECIAL RAPPORTEUR: What the Myanmar government claims to be the conduct of military security operations is actually an established pattern of domination, aggression and violations against ethnic groups.

(END VIDEO CLIP)

VAUSE: Well, Brad Adams is executive director of Human Rights Watch, the Asia division. He joins us now live from Berkeley California. Brad -- thanks for being with us.

You know, we heard from Lee, very critical of the Myanmar government denying access to the U.N., NGOs as well as the media. And she has some very harsh criticism for the de facto leader Aung San Suu Kyi.

Here's what she said.

(BEGIN VIDEO CLIP)

LEE: And her moral voice is a responsibility for her to preserve and she hasn't shown any indication of exercising that moral leadership. And I have repeatedly stated that she really should step now before the situation becomes irreversible.

(END VIDEO CLIP)

VAUSE: Brad -- it's said that she likes to do the right thing but has this now passed the point of no return for Suu Kyi?

BRAD ADAMS, HUMAN RIGHTS WATCH: Well, I think the most important thing to remember is that the military that carried out these operations. So we should be focused mostly on the military.

But special rapporteur Miss Lee is absolutely right. Aung San Suu Kyi is the singular person in Burma who could turn the situation around. If she tried her best it would be an uphill task because she would have to confront the military, which is the dominant power in the country.

And she can't undo the burnings, the killings, the arson, the rapes, the trauma that's happened to the Rohingya. But she could help start to create the conditions that would allow hem to return someday in safety and in dignity voluntarily. And that would require allowing the United Nations into the country to provide the kind of protection role that UNCHR and other U.N. bodies do around the world.

And so far as you said earlier in your report, she and the Burmese authorities are refusing to allow the U.N. into the country at all.

VAUSE: You know, officials in Myanmar they say this repatriation of Rohingya from Bangladesh is expected to take up to two years. Miss Lee says simply looking at the logistics, she believes it's more like 19 years.

If she's right or even close to being right is that sort of a deliberate tactic here by Myanmar's government to try to bottleneck, slow it down that it may take as long as possible?

ADAMS: The Burmese government committed ethnic cleansing. The purpose of ethnic cleansing was to push the Rohingya out of the country. So from your perspective and mine as, I think decent people, we think that the right thing to do is for people to be able to go home safely.

It may be that the Burmese authorities particularly the military only see their job as three quarters done. And so they don't want people to come back. They want the conditions to be so bad that they will stay away.

And so I think the special rapporteur was correct that the conditions not only aren't right, but that it will take a very long time before people would want to go home. And for them to want to go home, they're going to need to think that the people who carried out the burnings and the killings and the rapes are no longer in power and that they would be restrained from doing the same thing again.

And right now we have no indication that the Burmese authorities a, admitting that there's a problem and b, are taking any steps to stop that from happening again.

[00:25:02] VAUSE: You know, the AP, the Associated Press Claims to have seen video of five more unreported mass graves. The U.S. State Department spokesman - spokeswoman, Heather Nauert spoke about that today.

(BEGIN VIDEO CLIP)

HEATHER NAUERT, STATE DEPARTMENT SPOKESWOMAN: We are deeply, deeply troubled by those repots of mass graves. And I want to point out that these are in the northern Rakhine State. That is the exact area where we have seen the Rohingya flee their country for neighboring Bangladesh.

(END VIDEO CLIP)

VAUSE: I mean you can be troubled all you want but I guess the question is will we ever know how many were actually killed by Myanmar's military? ADAMS: Well, we may not. We won't unless outside independent experts are allowed in the country. I mean we won't unless the military domination of Rakhine state is reversed.

And really what we should be seeing is the Security Council acting under its international peace and security role to require that Burma allow peacekeepers in, allow human rights protection officers in, and allow an independent investigation.

The United Nations Human Rights Council has called for that but the major powers in the world still seem to think that somehow by being nice and gentle to Aung San Suu Kyi, that she will reverse things and allow them in.

And it's just very clear that she's not going to do the right thing without being put under the same kind of pressure that they would have put military under years ago when it was just a military dictatorship.

VAUSE: Ok. Brad -- again it's a story which obviously needs to continue to be reported on as much as we can. We appreciate you being with us.

ADAMS: Thanks, it's very depressing. Thank you for covering it.

VAUSE: Thanks -- Brad.

A short break. Next up, on NEWSROOM L.A. we'll on take you live to Pyeongchang, South Korea where the start of the 2018 Winter Olympics is just one week away.

And is that cup of java costing you just a little bit too much? What if you could choose your own price? Here in California, one coffee shop doing just that. Find out how that is working.

JOHN VAUSE, CNN ANCHOR: One week from now thousands of athletes from all around the world will march in the opening ceremony of the Winter Olympics, kicking off what South Korea promises will be the biggest Winter Games ever.

International athletes are now arriving at the Olympic Village amid tight security, including competitors from North Korea. A delegation of skiers, skaters and hockey players arrived on Thursday along with coaches and sports officials. They'll march in the opening ceremony and compete alongside South Korean athletes and all under a unified flag.

Let's go now to CNN's Paula Hancocks in PyeongChang, South Korea, where it's about 2:30 in the afternoon. And that clock is ticking down, not long now -- Paula.

PAULA HANCOCKS, CNN CORRESPONDENT: Well, that's right, John, and as you say, all the North Korean athletes are now here in the region. They're at the athletes' village in Gangnam and we've seen something that you don't often see in South Korea: a North Korean flag flying above that athletics village.

That's the sort of thing that usually could land you in jail because of the national security law. But, of course, things are very different now in the run-up to the PyeongChang Winter Olympics.

There is cooperation between the North and South Koreans and there is certainly growing excitement in the region because they have been waiting a long time for this. 2011 was when this region won the right to hold the Winter Olympics. They've been waiting a long time.

(BEGIN VIDEOTAPE)

HANCOCKS (voice-over): There's lot to toast in PyeongChang these days. This group of friends is making the most of the local cuisine and a splash of the local liquor. Barbecue and soju, two Korean specialties that will be in abundant supply for the month of February.

UNIDENTIFIED FEMALE: For us, as a restaurant, it's a fantastic opportunity to introduce Korean barbecue to the world. So it is very meaningful.

HANCOCKS (voice-over): Nick Gasson (ph) traveled from New Zealand to help the Olympics preparations. His company makes artificial snow.

NICK GASSON (PH), ARTIFICIAL SNOWMAKER: There isn't much but what we've been able to make has been really amazing.

HANCOCKS (voice-over): Everywhere you look, snowmaking machines are working overtime. The one thing the organizers cannot control, the weather. They're hoping the Games put PyeongChang on the map, encouraging a winter pilgrimage to South Korea in years to come.

Probably one of the biggest boosts to this region after the Olympics is over is this, the KTX, the fast train that runs from Seoul to Gangnam on the east coast of the country, where many of the Olympic venues are, in less than two hours. It usually takes around three hours if you're driving.

But to be fair, the traffic means it usually takes a lot longer.

Those in the PyeongChang region feel far closer to the capital now. Improvements in infrastructure, many think, wouldn't have happened without the Games. South Korea says this will be the biggest Olympics in history, with more athletes than ever before, even some from their northern neighbor, who they're still technically at war with, a united women's ice hockey team with players from both North and South Korea.

Suggesting President Moon Jae-in's early claim that this would be the Peace Olympics may not be as implausible as critics once thought.

For residents themselves, the Games have been good for business before they even start.

(END VIDEOTAPE)

HANCOCKS: So there certainly are high hopes in the region and across South Korea for these Olympics, the biggest Winter Olympics ever held. We know the U.S. team that's going to be here as well will be the biggest team of any country to be in a Winter Olympics. So certainly the expectations are high. And just one week to go before they start -- John.

VAUSE: It's going to be very bigly, I guess. And we're also expecting, you know, an increased number of Russian athletes showing up who originally we didn't think would be there.

HANCOCKS: Well, that's right. But we are -- well, potentially we are expecting some more Russian athletes. But of course, they will still have to be accepted by the IOC after having being cleared of doping violations.

But certainly there are a lot of political expectations on this Olympics as well. Obviously the Russian athletes will be competing under a neutral flag. You then have the joint North-South Korean team walking out at the opening ceremony.

You have the joint women's ice hockey team as well. So there is sporting unity that we're seeing at this particular Winter Olympics, as you often do around the world.

But of course whether that can actually translate into --

[00:35:00]

HANCOCKS: -- something politically is another question, whether it actually translates into tangible results once the athletes go home. We'll just have to wait and see for that.

VAUSE: And let's hope there's no cheating this time. Paula, thank you. Good to see you.

Well, coming up, 100 bucks for a regular cup of coffee?

Some customers are more than willing to pay that at one cafe. We'll explain why after this.

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(COMMERCIAL BREAK)

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VAUSE: The law of supply and demand is considered the backbone of a market economy. The fundamental concept which determines the prices of goods and services (INAUDIBLE) they tried that pay what you can business model, comrade, and the whole from each according to his ability, to each according to his needs, well, that was nice in theory. But not so hot in reality. Which makes the Metro Cafe in Santa Monica in California a curious

little oddity. Last October prices were removed from the menu. Customer were left to decide how much they would actually pay. A business model known sometimes as lunacy but actually technically pay what you want. And it's actually not so crazy.

Well, it doesn't sound very businesslike. The cafe has seen no fall in revenue. (INAUDIBLE) Steve Snook is the man behind Metro Cafe's business plan. He's with us right here in the studio to talk about this.

Good to see you, thanks for coming in.

OK. So clearly there are some customers who pay more and some customers pay less. It all balances out at the end of the month. Right?

So is that essentially what you've found over the last couple months?

STEVE SNOOK, METRO CAFE: That's what we've found.

VAUSE: How do you explain that?

SNOOK: Well, it all started, really, with -- there's some seniors. There's a tower next to where we are -- where we're located that has seniors on fixed income, 13 stories. And many of them said, we love your place and we love your coffee but we can't afford three bucks for coffee.

So (INAUDIBLE) what could you afford?

And they said well, like a buck of something.

I said, well, maybe we could make that happen.

So it -- we realized, though, though Santa Monica being one of the most expensive cities in the country, we had a lot of people that really had extra. And if they understood the mission and they understood that we really wanted to be good neighbors, then they would get behind it.

VAUSE: Because this is the amazing thing. Because this is a city here in Los Angeles and Santa Monica is by the beach, and the stretch of income inequality is a mess (ph).

SNOOK: Yes.

VAUSE: There are people who don't mind paying 100 -- is that the most you've had someone pay for a cup of coffee?

SNOOK: $104.

VAUSE: $104. And there are people who can't afford a buck.

SNOOK: That's right.

VAUSE: And they all come together at your coffee shop.

SNOOK: Yes. So when you paint that picture, you realize someone that can afford a lot more than 100, if they want to get behind what we're doing, not just what they're getting out of it.

So if they see someone that's homeless and they realize they'd like a cup of coffee but there's something more, we realize that there's got to be something more than just an exchange here. There's got to be some relationship that's built.

VAUSE: OK. That's what's in it for you. Because the revenue didn't go up, the revenue --

[00:40:00]

VAUSE: --didn't go down so it's that ability to bring people together?

SNOOK: Yes, the community.

VAUSE: Which is priceless.

SNOOK: True community.

VAUSE: Yes. People listen to this, they say, oh, pay what you want?

The inner voice is going, which shmuck is going to pay more -- I'll pay the least. People don't do that.

Why is that?

You may think it, initially.

SNOOK: Well, I think some people really feel like they're almost guilted into giving more or something. But if you ask our customers, you find out that's not the way they feel. Because honestly, some of them will come in and they'll say, listen, I've got a couple bucks. And they're not going to be treated differently. Nothing's going to change there. In fact, I think it's going to -- this warm reception across the board.

VAUSE: And so you're a religious man. The cafe is next door to a church.

SNOOK: Well, it is a church. We realize a church -- the church is not about something that happens on Sundays. We've created all kinds of things of what church is. It's a building or something. And we realize it is about people, seven days a week.

And it's got to be an open door and we've got to welcome our neighbors. Honestly, if we're going to love our neighbors, then we've got to love our neighborhood. And we've got to be willing to sacrifice a little bit to do it.

VAUSE: I took a look on Yelp, the reviews are pretty good, you get I think four or five stars. There's this one review on Yelp, here it is.

It's, "I'm docking a star because they didn't have too great a selection of beans available for brewing/pourover."

SNOOK: OK.

VAUSE: But it goes on to say, "I'm adding a star for the complete lack of religious proselytizing, print propaganda in the cafe in spite of its affiliation with the church."

I guess as Abraham Lincoln said, actions speak louder than words with what you're doing in the coffee shop.

SNOOK: I think so.

VAUSE: So when came to this conclusion that this was actually the business model you wanted to go down the road with, was it ever a concern that it wouldn't work, that you guys would be out of business in five days?

SNOOK: No, I think for us, it really is -- and I (INAUDIBLE) maybe with faith to step into something that you really believe in. And we've been walking this out. This is not just something that started a year and a half ago. It actually goes back to something we've been doing and investing in the community for 28 years.

VAUSE: We should point out that pay what you want, as a business model, it has been around for a couple of years. This restaurant in Philadelphia, I think; the Panera chain, the restaurants, they tried this with mixed success. I think they opened six of them and five have closed, one is still open.

So why does it work for you so far and why didn't it work for Panera?

SNOOK: Well, I think, for us it's not about the bottom line. So we're not beginning to look, just keep looking at the financial part of it. But believing that as we just keep serving our community and we keep treating people right and we run our business in a way that was reputable and without compromise, that it'll just continue to work and we're going to continue to walk it out.

VAUSE: We'll see you down there for coffee. Thanks, good to see you, appreciate it. Good luck, too.

SNOOK: Thanks.

VAUSE: And thank you for watching CNN NEWSROOM live from Los Angeles. I'm John Vause. Stay with us now. "WORLD SPORT" is up next. You're watching CNN.